Italy's talisman as they finished third and second in the 1990 and 1994 World Cups was appointed to the role after the Azzurri flopped as holders by going out in the group stage of the 2010 edition.
His brief was to reinvigorate the Italian game and boost the country's poor track record of blooding youngsters but the 45-year-old said he was largely ignored.
"I presented my project in December 2011, 900 pages, but they remained empty words. I don't like just sitting on a chair but to do things, therefore reluctantly I have decided to leave," he told Italian television.
Italy finished second to Spain in Euro 2012 under coach Cesare Prandelli and his position is unlikely to be affected by Baggio's departure.